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The Bank of...Granny and Grandad?
21 October 2020
Can you use gifted money to help buy a property?
For many younger people struggling to get a foot on the property ladder, the Bank of Mum and Dad is the only option. With rent taking a huge chunk out of their income and the requirement for increasingly onerous deposits, two in five renters do not believe they will ever be in a position to buy a property, despite a desire to own a place of their own. That’s where Bank of Mum and Dad come in, as well as ever more frequently, the Bank of Granny and Grandad.
Among the UK’s largest lenders
If the Bank of Mum and Dad was a high street lender, it would have been the UK’s 10th largest in 2019. Collectively, parents paid out £6.3bn to give their children the final push towards homeownership. What’s more, the average amount lent per transaction shot up by £6,000 to hit a generous £24,1002.
Knock-on effect on retirement prospects
The Bank of Mum and Dad phenomenon is not without its consequences however. With prospective retirees facing spiralling living costs and potential care fees, their generosity is directly impacting their future. According to a report from Legal & General, 15% of over-55s are accepting a lower standard of living after funding their child’s property purchase. While many are hitting their pensions savings to scrape the cash together.
Granny and Grandad lend a hand
In 2019, nearly a third of 18 to 34-year-olds received financial help from their grandparents to get a foot on the ladder. Coming as they do from a generation where homeownership was much easier to achieve and pensions easier to save for, they are more likely to have spare money available than their own children, who are already feeling the strain of saving enough to fund their later life. On average, grandparents lend £7,400 to their grandchildren (roughly a third of the average 10% deposit). And 23% of lucky homeowners on the receiving end of this assistance don’t ever expect to repay it!
Don’t compromise your future
We all want the best for our children, but there are ways of helping them out that don’t involve putting your financial security at risk. While the Bank of Granny and Grandad is certainly alleviating the pressure on parents, it’s not wise to rely solely on their support.
There are a range of government schemes available to prospective homebuyers which can help them buy a property without a significant cash boost from family members. The Help to Buy: Equity Loan, the Help to Buy: Shared Ownership scheme and the Lifetime ISA (LISA) can all help boost your child’s ability to buy their first home.
Other investment options
There are more ways to assist your children financially than just helping them buy a property – especially if you get started early. There are a wide variety of savings and investment options that allow you to start providing for your child’s future at an early age, putting them in a better financial situation in adulthood.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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Contrary to costs such as legal fees, estate agency fees or Stamp Duty, having your new home surveyed isn’t actually compulsory. However, with a property being the most expensive thing most of us will ever buy, the price of not having it checked by a surveyor could be devastating. If you buy a property for the seller’s asking price and later find it has serious defects, it’s too late to back out of the purchase or renegotiate a price with your seller. You’re also likely to find yourself paying out to rectify the fault – and probably a lot more than you would have paid for a survey in the first place! A survey to suit your needs There isn’t just one type of survey available – you can get different ones that range in cost, according to the kind of property you’re buying: Condition report What is it: a basic overview of the property that only highlights the most significant defects; it doesn’t go into detail. Suitable for: those buying a relatively new homes in good condition. Homebuyer report What is it: a more comprehensive survey that highlights obvious defects such as damp or subsidence. It will include advice on any necessary repairs or maintenance and may also include a valuation or an estimation of rebuild costs. However, it’s not an intrusive survey, meaning the surveyor will only be picking up on visible issues. Suitable for: those buying a standard property in a reasonable condition. Building survey What is it: the most comprehensive type of survey, which looks at the property’s structure and condition, lists any defects and advises on repair and maintenance work. Unlike a homebuyer report, this is a much more hands-on survey, so the surveyor will do things like going up in the loft or looking under floorboards or behind sofas. Suitable for: older or listed buildings, or properties that are in poor condition or have an unusual design or structure. But what if I’m buying a new build? Even though it’s tempting not to have a new build property surveyed, there can still be issues with new build homes that could be costly to repair. If you’re buying a new build, you’ll need a slightly different survey called a snagging survey. It identifies any defects with new build homes, from cosmetic issues to structural problems, which the developer will then have to fix within the two-year warranty period. We can help As a member of Openwork, we can refer you to our specialist Surveying Service, which offers access to a large network of approved surveyors across the UK. For your peace of mind, get in touch. Surveying is not regulated by the Financial Conduct Authority.
Get to know your SVR
When you get a mortgage the lenders will want to do some checks to confirm you have the income to pay the new mortgage and they will ask for documents from you. We work out from the documents you give us which lenders will lend you the new mortgage. We understand what lenders are looking for so we can put you in the best position. Get in touch and we will be happy to help.
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